RRSP Investors: Time to Buy Suncor Energy (TSX:SU) Stock?

Suncor Energy Inc. (TSX:SU) (NYSE:SU) is down 25% from last summer’s high. Should you buy the stock today?

Oil prices have staged a nice recovery off the late 2018 lows, but oil stocks continue to remain out of favour with the market.

Let’s take a look at the current situation in the sector and see if Canadian energy giant Suncor Energy (TSX: SU)(NYSE: SU) deserves to be in your RRSP portfolio right now.

Oil market

West Texas Intermediate (WTI) oil traded at US$74 at writing at the end of September last year before an unexpected plunge drove the price down to a December low near US$43. A new rally took it back above US$66 in April, but oil fell again through the first part of June to US$51. The market has since trended higher. At the time of writing, WTI oil trades for US$58.50 per barrel.

The roller coaster ride is a bit confusing and may well be one reason investors are giving oil producers a wide berth. Supply and demand doesn’t change that drastically in such a short period, so other forces are at play.

Negative pressure has come from the ongoing trade dispute between the United States and China. The longer the two economic powerhouses impose tariffs the higher the chances that we could see a global economic slowdown. Traders are concerned that oil demand would drop, which is one reason oil prices have seen some sharp declines.

Support for the market should come from supply disruptions, including the sanctions against Iran and political instability in Venezuela, Libya, and other oil nations. In addition, OPEC and a handful of other producers, including Russia, just agreed to extend supply cuts in an effort to prop up prices. The agreement is set to last through March 2020.

If the U.S. and China sort out their differences in the next few months, we could see an oil rally heading into 2020.

Should you buy Suncor?

Ongoing volatility should be expected in the oil market, but investors might want to start nibbling on the stocks of producers with strong balance sheets and growing dividends. Suncor has an advantage in that its downstream refining and retail operations provide revenue support when oil prices fall. The company can take advantage of the weaker periods to add attractive assets and then reap the rewards when oil prices recover.

The board raised the dividend by almost 17% for 2019 and Suncor is buying back shares with extra cash flow. The stock currently trades at $41 per share at writing compared to $55 last July. Investors who buy today can secure a solid 4% yield and are looking at close to 30% upside potential when market sentiment improves.

If you are searching for a buy-and-hold stock for your RRSP, Suncor deserves to be on your radar today.

Fool contributor Andrew Walker has no position in any stock mentioned.

More on Dividend Stocks

Dividend Stocks

How I’d Build $200 a Month in Tax-Free TFSA Income With Peyto Exploration & Development and Automotive Properties REIT

These two monthly-paying dividend stocks present compelling opportunities for income-seeking investors.

Read more »

ETFs can contain investments such as stocks
Dividend Stocks

This ETF Yields 3.4% and Pays You Monthly: It’s a Smart One for Retirement Savings

Here’s why this simple Canadian dividend ETF and its monthly payments make it an ideal investment for your retirement savings.

Read more »

Two senior friends playing beat tennis on sand tennis court
Dividend Stocks

I Found the Ideal Retirement TFSA Stock Paying 5.7%

An ideal retirement TFSA stock not only pays a high yield but must also have secure cash flows from a…

Read more »

Train cars pass over trestle bridge in the mountains
Dividend Stocks

Is Now a Good Time to Start Investing in Canada? What to Consider

Here’s why now can be a good time to start investing in Canada and what to consider as you build…

Read more »

House models and one with REIT real estate investment trust.
Dividend Stocks

An Ideal TFSA Stock for November, Paying 5.2% Each Year Into Your Retirement Fund

With a 5.2% dividend yield paid monthly, this Canadian stock could help you build a recurring retirement income stream while…

Read more »

man in bowtie poses with abacus
Dividend Stocks

How to Read a Payout Ratio in 60 Seconds

Understand the payout ratio and its significance. Learn how it helps assess dividend stocks in just one minute.

Read more »

earn passive income by investing in dividend paying stocks
Dividend Stocks

How to Set Passive Income Goals You Can Actually Reach

Setting passive income goals is easy, but it should be realistic as to how much you can really set aside…

Read more »

Nurse talks with a teenager about medication
Dividend Stocks

I Found a Dividend Stock That Pays 4.6% Monthly Like an ATM

The Richards Group's monthly dividend yields 4.6%. The small-cap stock's high-margin healthcare pivot makes this passive income source an attractive…

Read more »